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Market Plus: Market Analyst Virgil Robinson and Walt Hackney

posted on February 17, 2012

Market Plus: Market Analyst Virgil Robinson and Walt Hackney

Pearson: This is the Friday, February 17, 2012 version of Market Plus. Thanks for joining us here on the program. And wow what a show we had this week and we have got Virgil Robinson with us and we have Walt Hackney with us. And we had Walt Hackney speechless over the Fed Cattle Market. In the 21 years I have known him I have never known him to be speechless about anything. But Walter it was really under pinning your comments. You talked about his feeder market exploding and really it is not looking back much. They just aren't out there. So let me ask you this question. I have been asking you this question now for I think seven years. Are we holding back heifers now? Are we going to expand the cow herd at all? Are we going to see more calves available in 2013?

Hackney: Yes, we are holding back a few heifers now.

Pearson: It is awful hard to do with these prices.

Hackney: That is exactly right but we are a few. Nothing in the amount that would cause any kind of opinion that we are going to increase so to speak the cow herd. Mark, the cow herd is the lowest it has been since back in maybe the mid-1950s. There is nothing going to change that this year. A little change will happen in 2013 if we see any result of any kind of retention it will be in 1914 and 15.

Pearson: I want to switch back to the fat cattle.

Hackney: Excuse me. I am sorry, Mark, 2014/15. I am sorry.

Pearson: I want to flip back here to the fat cattle market. You talked about the cash market on Thursday going into Friday a seven dollar move and you said you can't explain it. Is that scarcity? Have we pulled a lot of cattle forward? What is happening right now as you look at this cash market because we are getting this song about what you know the packers always - and I have been up all night worried about packers. But apparently they have got money in their pocket to buy up. Are they moving product?

Hackney: Yes, they are moving product. How they are moving hasn't been reported. I don't think the losses in the packing, beef packing, industry are significant as it has been decided by those that put the reports out. The packer cannot be. That lame in his education to know that from one day loosing a hundred or something a head on fed cattle going through the plan to the next 24 hours paying seven dollars a hundred weight more there - there's -ludicrous.

Pearson: Have you ever seen that move in your lifetime?

Hackney: It is an insult to my intelligence and it should be an insult to the cattle feeding industry’s intelligence. The fact that remains that's why, Mark, the feedlots set all week long for six straight weeks from Monday through Thursday refusing to sell a hoof cattle is because on Friday they know that the golden eagle is going to drop an egg on them and today was the occurrence.

Pearson: They did it and that is what happened on the board too. They saw that and the board exploded too.

Hackney: Yes.

Pearson: Ok. All right. We didn't get to talk much about hogs and there wasn't much frankly to talk about in hogs this week. You talk about the export markets, I know that doesn't excite you that much, you were talking last fall you thought we would see bigger numbers. -- confirmed that Hogs & Pigs Reports. We have got more numbers out there. Is there going to be a drag in this hog market or are we going to be moving plenty of pork?

Hackney: Well, we are maintaining a good balance between product usage and live hog production. We're - as long as the producers don't make that hug error of betting on the come to the point where they make heavier hogs on the feeding floor. If they will continue to market those hogs on the premise of 420 to 2500 head a day on that premise 2.1 to 2.2 million head of hogs a week if they will gear their productivity and marketing to that we're ok on our inventory.

Pearson: Fat cattle market one last call. What do you think is going to happen next week in the cash cattle market, Walter Hackney?

Hackney: Well, if the - live cattle futures are indicative to any degree of the trend of the fundamental cash, we, I guess, could see a dollar thirty/thirty-one dollars. In fat cattle next week expect to see some feedlots pricing cattle a dollar thirty starting Monday.

Pearson: Wow. These are interesting times Virgil Robinson, and you have been going through the grain market now for five years, almost six years, and we had the visit with the Vice President of China coming back to Iowa which put a real exclamation point on the importance they have for food demand and especially from the United States and they are proving it. They have already been in the bean market in a big way and they were talking about corn and of course they are picking some corn out of Argentina. You talked about South America. How worried are you about that Argentinean corn crop? Has USDA got it about right in terms of what its size is going to be?

Robinson: Well, I can't speak, Mark, that is gospel and they are certainly subject to change those production numbers but they have been willing to reduce the size of that crop in each of the last couple three reports, Mark. So, they are acknowledging clearly that there were weather problems through much of the summer growing season. Now there is a winter season right be hind that too, Mark, where they will make an effort to again plant a crop and there will be corn included in that. How well it does? We will see.

Robinson: But corn inventories and one point I should make here, Mark, I spoke about wheat supply, corn supply; clearly there is a relationship there as we visit tonight in many, many markets wheat continues to trade below the price of corn. So as a feed input it may well find its way into more rations or certainly many rations where that supply is available.

Pearson: Yes, out in Colorado, Walt, all those guys, all those people you have dealt with, they are feeding a lot of wheat out there and DDGS.

Hackney: Forty-five percent in some rations.

Pearson: That is about as big of ration percentage -

Hackney: To high. To high. You will stick a lot of kettle with forty-five percent wheat because it is too high in protein.

Pearson: Yes but they are going through it. There was a huge percentage over the last quarter of last year. So it is there, you know? And as Virgil points out some cases it is cheaper than corn. Talk Virgil about - we talked price and we talked about what you thought we would see here old crop and again we have had a good move here. This has been a good rally up from that last USDA Report.

Robinson: Mark, again if I knew each individuals position what they have sold to this point in time I am just going to assume they haven't sold anything. And under those circumstances I just feel that the basis and the lack of carry is such a strong demand signal, Mark, that failure to reward that could at some point in the not to distant future prove to be a disappointment. So, historically at least in my grain marketing and grain merchandising experience when you have a combination of very, very strong basis and little to no carry to deferred positions it is often times the prudent thing to do reward it with something.

Pearson: As a guessing person, Virgil, where would you guess this corn acreage is going to come in at? We are at this 94/95 million range. Are you pretty comfortable with that?

Robinson: I think the majority of estimates from sources that I would consider to be highly reputable around that 94/94+ area, Mark. Yes.

Pearson: One of our online questioners says what if beans go up another buck from here? Are we going to see a little bit more shift to beans this late?

Robinson: You could. There will be some areas where there are some swing acres that certainly could be influenced by that price ratio and as mentioned, Mark, just in the last two weeks after acknowledging the shorter crop in Argentina and Brazil, to a lesser extent, the ratio between new crop soybean futures and new crop corn futures changed - moved towards favoring more soybean acres. So, clearly that is a battle that is underway and will continue so and weather or lack of moisture in select areas could certainly swing acres away from corn and or sorghum into something, excuse me, away from corn into sorghum and perhaps even soybeans.

Pearson: All right. Well, I didn't get into hay prices with Walter, but there is another area that is going to get robbed of some acres despite some very, very high prices. We are out of time. Walter, thank you. Virgil, thank you. Guys thanks for being with us this week and thank all of you for joining us here at our Market to Market website and from all of us on Market to Market, I am Mark Pearson, thanks so much for watching. Have a great week.

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